Federal Gov’t Borrowing Must Be Strategic, Beneficial To Nigerians – Rewane

Renowned economist and Managing Director of Financial Derivatives Company Limited, Bismarck Rewane, has advised the Federal Government to adopt a more strategic approach to borrowing, stressing that loans must be tied to productive ventures that benefit the Nigerian people.

Rewane spoke on Thursday on Channels Television’s ‘Business Morning’ show, monitored by our correspondent. He emphasised the need for the Tinubu administration to focus on revenue-generating projects that deliver real dividends of democracy.

“We need to be very intentional, very strategic and focus on what we are borrowing for, to generate revenue and to have an impact so that the people can begin to reap the dividends of reforms and democracy,” he said.

According to the Debt Management Office (DMO), Nigeria’s external debt stood at $45 billion as of December 31, 2024. In just 16 months, the Tinubu administration has reportedly borrowed $6.45 billion from the World Bank, raising concerns among analysts about the long-term sustainability of the country’s debt profile.

Rewane noted that while Nigeria requires foreign exchange inflows, these should ideally come through voluntary investments rather than excessive borrowing, unless such borrowings are done strategically.

“Nigeria needs some dollars and those dollars are either going to come in from investments that are coming in voluntarily or from borrowings that are done strategically,” he explained.

He further warned that expectations of a drop in global interest rates, which could have eased Nigeria’s debt servicing burden, are now being delayed, potentially forcing the country to raise funds at a higher cost.

“If we were anticipating to borrow because we thought interest rates were going to come down and the debt service burden would not be as hard as originally expected… Now, the drop in interest rate is going to be delayed a little bit longer toward the end of the year or next year, which means that Nigeria would have to raise money at a higher rate than anticipated,” he said.

Rewane stressed the need for prudent fiscal management: “If that be the case, we have to be more efficient in the way we use our money. What are we borrowing for? Are those budgets going to generate enough revenue to service those debts? Those are the key elements.”

With over 740 days already spent in office, the economist reminded the Tinubu administration that time is running out to demonstrate the impact of its economic reforms.

On monetary policy, Rewane also weighed in on the Central Bank of Nigeria’s (CBN) benchmark interest rate, currently pegged at 27.50%, saying a downward review is essential to stimulate investment.

“While the mandate of the central bank is not growth-driving but also about price stability, the central bank would focus more on inflation but at the same time would give an impetus to the fiscal authority to say we have brought down interest rates to encourage people to invest,” he said.

However, he stressed that fiscal authorities must also play their part in eliminating structural challenges that hinder productivity.

“The government also has a responsibility to remove the bottlenecks to productivity,” he added.

Rewane’s comments come amid ongoing debates about Nigeria’s debt sustainability and the effectiveness of the current administration’s economic policies. As borrowing continues, many experts were calling for greater transparency and impact-driven fiscal planning.